The first, second, and third questions are answered in the negative, and the superior court is advised to render judgment for the defendant.

A privilege tax, as such, measured by the entire property, or capital, or receipts, or profits, gross or net, of a foreign corporation engaged in a local business within a state other than that of its origin, reaches all its property, its receipts, or its profits including that in other states, and hence must be held unconstitutional, unless the circumstances show that the tax is a reasonable one, and laid, not upon the property, but upon the right of the corporation to carry on a local

WHEELER, J. (dissenting). The opinion of the majority holds that the tax in question as authorized by the statute of Con

necticut "is a tax in the nature of an excise levied against domestic and foreign corporations alike for the privilege of doing business in a corporate capacity within the state," and as such is not in violation of the commerce clause or the due process clause of the

United States Constitution. The case before us concerns a tax levied upon a foreign corporation doing a local business in Connecti

cut.

There are two classes of so-called privilege or excise taxes upon a foreign corporation. One is a privilege tax in name and fact-a tax levied for the privilege of doing business in a state other than that of the corporate domicile and in no sense levied because of or in relation to property value. The other is a privilege or excise tax in name, but in fact in its nature a property tax, levied upon a corporation doing business in a state other than that of its domicile to compel payment of a tax upon the value of its property or business in that state as a going concern in relation to or in connection with its other property or its entire business, and not covered by the local tax upon the physical property within the state.

The privilege tax proper is a tax upon the right of the foreign corporation to carry on a local business outside the state of its origin. The foreign corporation engaged partly or chiefly in interstate business may be required to pay a privilege tax in respect of that business in any state, other than that of its domicile, where it does a local business. This tax may be a given sum, or it may be measured by its entire capital, or property, or receipts, or sales, or gross profits, or net profits, provided that the payment of the tax be not made a condition of the granting of the privilege, and provided, further, that it appears from the circumstances that the tax is reasonable; that is, that it is what it purports to be, a mere privilege or excise tax, and not a tax which actually has the effect of hampering,commerce or taxing 108 A.-11

reasonableness and the ultimate purpose of the tax may be determined is the fixing in which amount the percentage cannot be althe statute of a maximum base sum beyond lowed to realize. Such a tax will be held prima facie reasonable, unless the circum

stances compel another conclusion. measured by a percentage on capital stock, An instance of a privilege or excise tax measured by a percentage on capital stock, held a violation of the commerce clause, is uncontrolled by a named maximum sum and found in International Paper Co. v. Mass., 246 U. S. 135, 38 Sup. Ct. 292, 62 L. Ed. 624, Ann. Cas. 1918C, 617. And an instance of a similar tax, but its total exaction controlled by a named maximum, and held not a violation of the commerce clause, is found in Baltic Mining Co. v. Mass., 231 U. S. 68, 34 Sup. Ct. 15, 58 L. Ed. 127. That the reasonableness of the privilege tax is the test of its validity appears in General Railway Signal Co. v. Virginia, 246 U. S. 500, 511, 38 Sup. Ct. 360, 62 L. Ed. 854, where a statute providing for a specific fee of $1,000 upon corporations whose capital stock tween $1,000,000 and $10,000,000 was upheld upon the basis of the reasonableness of the fee under all the circumstances, although the case was said to be on the line.

When the opinions of the later cases are read in conjunction, we think they will be found to hold that the limitation of a statute of a maximum privilege tax removes these constitutional objections, unless the maximum be unreasonably high; that the maximum limitation may serve as evidence of the reasonableness of the tax, and that a privilege tax which is reasonable and is not made a condition of the right to do business can never be held to violate the commerce clause or the due process clause. Baltic Mining Co. v. Mass., 231 U. S. 68, 34 Sup. Ct. 15, 58 L. Ed. 127; International Paper Co. v. Mass., 246 U. S. 142, 38 Sup. Ct. 292, 62 L. Ed. 624, Ann. Cas. 1918C, 617; Looney v. Crane Co., 245 U. S. 178, 38 Sup. Ct. 85, 62 L. Ed. 230; General Railway Signal Co. v. Virginia, 246 U. S. 500, 38 Sup. Ct. 360, 62 L. Ed. 854.

The majority opinion reiterates that "the tax is a tax on the privilege of doing busi

ness in a corporate capacity in this state." Our statute provides no maximum. The greater the real estate and tangible property here to that elsewhere, the greater the amount of tax; and the greater the intangible property outside Connecticut, the greater the tax. The amount to be realized in this case is $12,000; in another case it might be $100,000. Such a tax cannot be held reasonable. The decisions to which we have referred conclusively establish this.

If the majority opinion rested upon this proposition, we might rest our discussion upon what has been said, with the single addition of a discussion of the case of United States Glue Co. v. Oak Creek, 247 U. S. 321, 38 Sup. Ct. 499, 62 L. Ed. 1135, Ann. Cas. 1918E, 748, upon the authority of which the court places its opinion. But the majority opinion goes further. It does not distinguish between these two classes of so-called privilege taxes, and its chiefest argument in support of this tax is that, "if the ascertainment of its amount is made dependent in fact on the value of its property within the state, and if it does not exceed the sum which might be leviable directly thereon," the tax may be levied. Such a tax, though called a privilege tax, is in truth a species of property tax. It is based upon the value of its property within the state; it increases or diminishes as that increases or diminishes. The tax attacked in this proceeding is one laid upon the net income of the plaintiff, a foreign business corporation, engaged in carrying on a local business in Connecticut. The plaintiff does all of its manufacturing in this state, and most of its sales and all of its financial business it transacts outside of this state. Practically, the production side of its business is here, and the commercial side outside Connecticut. All of its property here, and all of its business here, and all of its earnings here, may be taxed separately or in connection with or in relation to the business as a whole, and to the business as a going concern, provided the amount on which the tax is levied fairly represents the value of its property here, or its earnings made here.

When the tax under consideration was authorized, the plaintiff's taxes in this state were confined to a direct property tax on its real estate plant and tangible property on hand at the levy of the tax. Throughout the year preceding the tax levy the corporation continued manufacturing its goods, and sending its product to its different branches outside our state, where it was sold or rented.

While these goods were in process of manufacture, or held in stock, or in course of transit, in this state, they were subject to a state tax, justified upon the basis of all taxes, the protection afforded the goods and the business by the taxing government.

yond the mere property here, because it is a part of an interstate business.

Connecticut should have and does have the right to levy a tax proportioned to the pro tection afforded by it to the local business .of the foreign corporation. This may be accomplished in a case like this by a tax upon all the product made, or upon the earning power of its business located here, or upon the net income derived from the property made here, based upon the value of the property and business here as a part of and in relation to a going concern engaged in interstate business. United States Express Co. v. Minn., 223 U. S. 345, 32 Sup. Ct. 211, 56 L. Ed. 459. Some of the decisions and their holding upon this point are the following:

It was held in Adams Express Co. v. Ohio State Auditor, 166 U. S. 185, 17 Sup. Ct. 604, 41 L. Ed. 965, that a state statute taxing a corporation having an interstate business may levy the tax, not only on the tangible property within the state, but on such portion of the earning power of the property as the property in the state bears toward the whole property. And the local business may be taxed as a going business as a condition upon which the corporation may continue to do business in the state. Baltic Mining Co. v. Mass., 231 U. S. 68, 80, 34 Sup. Ct. 15, 58 L. Ed. 127.

But though the foreign corporation is engaged in interstate commerce, all of its property within a state is taxable there. Baltic Mining Co v. Minn., 231 U. S. 68, 82, 34 Sup. Ct. 15, 58 L. Ed. 127. And "a legitimate tax may be laid in a state in part on the avails or income from the conduct of such commerce." United States Express Co. v. Minn., 223 U. S. 335, 32 Sup. Ct. 211, 56 L. Ed. 459. The capital or earnings, gross or net, of a corporation employed chiefly in interstate commerce, may be taken as a mere measure or index to ascertain the local tax of the foreign corporation doing an interstate business upon its property or its business in the state levying the tax. Baltic Mining Co. v. Mass., 231 U. S. 68, 83, 34 Sup. Ct. 15, 58 L. Ed. 127; Wells Fargo Co. v. Nev., 248 U. 165, 167, 39 Sup. Ct. 62, 63 L. Ed. 190.

S.

Such a tax is not a tax upon the property engaged in, or the earnings derived from, interstate commerce; these merely help measure the value of the property or the business of the foreign corporation in the locality of the tax, from which the proper tax is ascertained. Cudahy Packing Co. v. Minn., 246 U. S. 450, 454, 38 Sup. Ct. 373, 62 L. Ed. 827; Flint v. Stone Tracy Co., 220 U. S. 108, 163, 31 Sup. Ct. 342, 55 L. Ed. 389, Ann. Cas. 1912B, 1312.

A tax so measured does not unnecessarily burden commerce, and does not tax property outside the jurisdiction imposing the tax. Ohio Tax Cases, 232 U. S. 576, 34 Sup. Ct.

The Wisconsin tax on net income was one substantially in lieu of all other taxes except those on real estate. It included all other forms of property tax, and also all forms of excise tax. The reasoning of Mr. Justice Pitney that the tax on the net income of this domestic corporation engaged in interstate business is an indirect burden upon commerce, and hence valid, does not seem to be applicable to the tax on the net income of a foreign corporation arising from its interstate commerce. And certainly it can have no application to the net income of this corporation, which was earned upon that part of the property or business located here.

We conceive that the fundamental justification for a tax upon the net income of a foreign corporation is that the income taxed is subject to the state's jurisdiction and that the tax laid does not hamper commerce. The fact that the tax is merely an indirect burden on commerce will not save it, if the property or income taxed be that of a foreign corporation, and the property be located or the income be earned outside the state.

by a tax laid on the net income of a corporation by the state or country of its domicile. All of such income must respond to the valid exactions of government.

A tax on net income of a foreign corporation, proportioned to the earnings in the state of the tax, does not burden commerce. When the tax goes beyond this, and taxes earnings made outside that state, it is a tax upon property outside its jurisdiction, and violates the due process clause, and as a consequence necessarily burdens commerce.

The authorities from Western Union Tel. Co. v. Kansas, supra, left the subject of taxation, always difficult and somewhat obscure, reasonably clear, and I find it hard to persuade myself, as my Brethren seem to think, that there has been a determination to substitute a new theory of the indirect burden of the net income tax for the doctrine of those cases.

A tax by a state on the gross income, or the capital, as such, of a foreign corporation, necessarily burdens commerce and taxes property outside the state. The same holding must in logic follow as to net income.

"A tax upon a corporation may be proportioned to the income received, as well as to the value of the franchise granted, or the property possessed." The Delaware Railroad Tax, 18 Wall, 206, 21 L. Ed. 888.

I am of the opinion that questions 1 and

(134 Md. 589)

All taxes upon a foreign corporation engaged in local business outside its domicile are indirect burdens on commerce. When levied on property physically within the state, or imposed upon the privilege of doing business in the state, or levied upon the value of property of the corporation within the state, such taxes may be valid exactions. And when levied upon property outside a state, or the tax exaction is unreasonable, they are invalid, and it makes no difference whether the measure of the tax be net income or gross income.

The tax on the net income, in Peck & Co. v. Lowe, 247 U. S. 173, 38 Sup. Ct. 432, 62 L. Ed. 1049, was a tax upon the net income of a domestic corporation, so far as the United States was concerned, by the country of its domicile. And the tax upon the net income of the United States Glue Company was a tax upon the net income of a domestic corporation by the state of its domicile. There

(No. 17.)

(Court of Appeals of Maryland. June 24, 1919. Rehearing Denied Oct. 29, 1919.)

1. BASTARDS 12, 100-INHERITANCE; SUBSEQUENT MARRIAGE OF PARENTS.

Under Code Pub. Gen. Laws, art. 46, § 29, the subsequent intermarriage of the parents, and acknowledgment by the father of a child born out of wedlock as his child, makes such child legitimate, and capable in law to inherit, as if born in wedlock.

2. JUDGMENT 707-RES JUDICATA;

TARDY PROCEEDINGS.

BAS